Beginning this year, the Financial Crimes Enforcement Network (FINCEN), a division of the Department of Treasury, requires most small business entities to file a Beneficial Ownership Information (BOI) report. The BOI report is a document that names the individuals who ultimately own or control a company. This rule is designed to promote transparency in business operations by specifying human owners and key decision-makers. The primary purpose of the report is to help combat financial crimes, which are enabled through use of complex corporate structures and shell entities.
Most small business entities need to file their initial report this year. FINCEN lists 23 exemptions in its Small Entity Compliance Guide; however, the exceptions generally apply to entities that are already heavily regulated due to their size or the nature of their industry. One notable exception is inactive entities in existence before 2020. (Please see the Guide to review exemption criteria.)
The BOI rule applies to legal entities that register with their Secretary of State. For example, small businesses registered as LLCs, S-Corporations, and C-Corporations are likely reporting companies. Unregistered sole proprietors do not have to file the BOI report.
For entities in existence before 2024, the deadline to file an initial report is December 31, 2024. Businesses that form in 2024 should file the report within 90 days of registration. Beginning in 2025, this filing deadline will be within 30 days of registration. In all practicality, it makes sense for new business owners to include the BOI report on their checklist of "To-Dos" when creating a new business entity.
Beneficial owners that need to be included in the report are typically those humans who exercise substantial control over the business or who own or control at least 25% of a reporting company. In addition, if certain information in the report changes, an updated report must be submitted. For more guidance on these topics, I recommend referring to the FINCEN Beneficial Ownership Information FAQs.
Finally, with respect to my clients, I find that the vast majority of the information requested in the BOI report is already on file with the Internal Revenue Service. However, one added requirement of this report is the uploading of a picture ID for beneficial owners.
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